China New Borun (New Borun) was attacked by short-seller Citron Research in October 2010 alleging fraud. This was followed a few weeks later by short-seller Alfred Little. New Borun claimed that its corn fermentation "Wet Process" was highly profitable, giving it an edge over competitors. This resulted in super-normal gross profit margins of 22-24%. However, the short-sellers pointed out that it seemingly only cost US$80,000 to develop this technology over three years and that most competitors were moving over to semi-dry processes; indeed, even New Borun was reportedly upgrading its plants. Furthermore, SAT filings reportedly showed gross margins of less than 10% and undisclosed debt of RMB270m (US$40m). While our screens suggest that New Borun had traits in line with past frauds, its auditors BDO never resigned. We think the company was likely faking profits up to FY13 but it was never proven. The company was delisted from the NYSE in 2019 and seems to have gone dark.

Last updated September 2021 

The information on this page has been compiled from publicly available sources. GMT Research Limited has not verified the information and does not warrant its accuracy. Any claims made or views expressed are not necessarily those of GMT Research Limited.